Vecima Reports Q2 Fiscal 2021 Results

  • Revenue – $30.4M, Gross Margin – 50.0%, Cash Balance – $20.8M
  • Achieved record Q2 Entra sales of $8.0M, up $6.9M year-over-year and $2.8M quarter-over-quarter with multiple customers purchasing a wide array of products from Vecima’s combined DAA portfolio
  • Generated Adjusted EBITDA of $2.5M
  • Increased commercial video sales and secured first Tier 1 MSO order for next-generation TerraceIQ

VICTORIA, British Columbia–(BUSINESS WIRE)–Vecima Networks Inc. (TSX:VCM) today reported financial results for the three and six months ended December 31, 2020.

FINANCIAL HIGHLIGHTS

(Canadian dollars in millions except percentages,

employees, and per share data)

Q2FY21

Q1FY21

Q2FY20

Revenue

$30.4

$27.8

$25.1

Gross Margin

50%

47%

64%

Net (Loss) Income

$(3.1)

$(0.8)

$3.6

(Loss) Earnings Per Share1

$(0.14)

$(0.04)

$0.16

Adjusted (Loss) Earnings Per Share1, 2, 3, 4, 5

$(0.14)

$(0.04)

$0.15

Adjusted EBITDA2

$2.5

$2.2

$7.0

Cash and Short-term Investments

$20.8

$27.3

$40.2

Employees

466

456

368

1 Based on weighted average number shares outstanding.

2 Adjusted Earnings Per Share and Adjusted EBITDA do not have a standardized meaning under IFRS and therefore

may not be comparable to similar measures provided by other issuers. See “Adjusted EBITDA and Adjusted Earnings (Loss) Per Share” below.

3 Starting in Q4 fiscal 2019, we have changed our definition and calculation of Adjusted Earnings Per Share. For a reconciliation

of Adjusted Earnings (Loss) Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the second quarter

of fiscal 2021.

4 Adjusted Earnings Per Share includes non-cash share-based compensation of $1.2 million or $0.05 per share for

the three months ended December 31, 2020, and $1.4 million or $0.06 per share for the six months ended December 31, 2020.

The non-cash share-based compensation primarily reflects certain performance-based vesting thresholds achieved

under the Company’s Performance Share Unit Plan.

5 Adjusted Earnings Per Share includes foreign exchange loss of $1.2 million or $0.05 per share for the three months

ended December 31, 2020, and $1.4 million or $0.06 per share for the six months ended December 31, 2020.

“Vecima’s sales climbed to $30.4 million in the second quarter, signifying rapid year-over-year growth of 21% as our next-generation technologies gained momentum,” said Sumit Kumar, Vecima’s President and Chief Executive Officer. “We paired our excellent sales performance with a gross profit of $15.2 million and adjusted EBITDA of $2.5 million, which we achieved despite a $1.2 million reduction of EBITDA from significant foreign exchange headwinds during the period and the addition of the first full quarter operating expenses from the acquired Nokia assets, which we continue to anticipate as EBITDA neutral on a first full-year operating basis.”

“Our top-line performance represented the best quarter in almost five years and was led by surging demand for our industry-leading portfolio of Entra Distributed Access Architecture (DAA) products. Entra sales accelerated to $8.0 million during the period, representing impressive sales growth of more than 6X year-over-year and 54% sequentially. Keep in mind that we are still in the very early stages of the DAA market. We see much more to come from Entra as current and additional customers transition to scale deployment as a broad set of MSOs initiate field deployments of DAA in response to both network capacity pressures and the larger trend of ramping access network bandwidth. Our customer engagements for Entra have now grown to 58 operators worldwide, and 24 of those customers have purchased DAA products for deployment from Vecima.”

Added Mr. Kumar, “Vecima’s second quarter sales momentum was further supported by robust demand for our commercial video products, particularly the TC600E, as operators continue to build out their MPEG 4 networks and a Tier 1 customer began associated densification. We also secured the first order, from a Tier 1 MSO, for our next-generation TerraceIQ hospitality industry platform and continued to see healthy demand for our legacy TerraceQAM platform where the entire widely-deployed population is upgradable to the new TerraceIQ when operators are ready.”

“In our Content Delivery and Storage segment we made important strides as we continued to consolidate the record customers wins of last year, secured an additional portfolio-wide IPTV customer, released multiple new product versions within our industry-leading MediaScaleX product family, and expanded service revenues and international sales,” added Mr. Kumar. “Across our business, we are addressing major market opportunities with technologies closely aligned to the needs of our global customers and laying the foundation for powerful growth.”

BUSINESS HIGHLIGHTS

Video and Broadband Solutions (VBS)

  • The VBS segment delivered exceptional revenue growth of 98% year-over-year and 22% quarter-over-quarter, generating $16.5 million in sales as customers continued to transition to next-generation networks using Vecima’s platforms

DAA (Entra family)

  • Deployments of next-generation Entra DAA products, with the industry only in the beginning phases of the DAA market, accelerated to $8.0 million in Q2, a 6X increase from $1.1 million in Q2 fiscal 2020 and up 54% from $5.2 million in Q1 fiscal 2021. Entra results for the quarter included $3.4 million of sales from the cable access portfolio acquired from Nokia in Q1FY2021. Sales from the acquired portfolio were $1.0 million in Q1 fiscal 2021.
  • Production deployments of the industry-leading, multi-core interoperable Entra Remote PHY Node began ramping at the lead Tier 1 customer and deployment-related purchases were initiated at multiple additional MSOs in the second quarter. Combined with Entra Remote MAC-PHY Node and 10G EPON orders, Entra DAA platforms are now being sold to 24 operators on five continents
  • Global customer engagements for Entra have expanded to include 58 MSOs, including operators in the US, Canada, CALA, EMEA and APAC. Over 40 operators across the globe are currently in lab trial, field trial, or live deployment phases
  • Introduced new major software release for the Entra Remote MAC-PHY and DPoE/EPON Unified Cable Access Solution portfolio of products, enabling service providers worldwide to increase network scalability, performance, and upstream capacity

Commercial Video (Terrace family)

  • Second quarter Terrace family sales grew 51% to $5.9 million from $3.9 million in Q2FY2020, supported by strong TC600E demand
  • TerraceQAM sales remained on track for an excellent year with solid Q2 sales of $2.5 million following very strong Q1 sales of $4.2 million
  • Achieved a significant milestone with launch of next-generation TerraceIQ system and delivered initial deployment orders to a new Tier 1 MSO customer

Content Delivery and Storage (CDS)

  • Continued to consolidate the record new business wins of fiscal 2020, generating CDS sales of $12.5 million with service revenues hitting an all-time high and growing by 12% year-over-year
  • Secured an additional IPTV customer win for the entire MediaScaleX portfolio, encompassing IP Linear, IP Video on Demand, and cloud DVR
  • Won three new broadcast post-production customers for ContentAgent, Vecima’s video workflow management system
  • Released multiple new product versions, adding significant new functionality in the areas of visual trick play, multi-tenancy, dynamic ad insertion, integration with additional partners, and support for new content formats

Telematics

  • Increased engagement with municipal government customers with expansions adding 330 new subscribers
  • Continued penetration in the moveable assets market with 190 new subscribers in the restoration and emergency medical services industries

Governance

  • Cable industry veteran and 2020 Cable Hall of Fame Honoree, Mr. James Blackley, was elected to Vecima’s Board of Directors at the Company’s Annual General Meeting on December 7, 2020. Mr. Blackley brings extensive cable industry experience to the board, including senior management experience with both Charter Communications and Cablevision. Mr. Ben Colabrese stepped down as Director of the Board, having served since 2017 and having provided valuable contributions to Vecima during his tenure

“Fiscal 2021 is proving to be a breakout year for Vecima,” said Mr. Kumar. “The vast potential of the cable industry’s once-in-a-lifetime technology transition to DAA is materializing, and we are tapping into it broadly with the industry’s most comprehensive portfolio of distributed access solutions and the ability to address any and all of the potential DAA system architectures.”

“Simultaneously we are laying the groundwork for growth in our Content Delivery and Storage segment. While we continue to anticipate measured CDS sales growth in fiscal 2021, IPTV usage is increasing rapidly in households around the world and our MediaScaleX solutions enable operators to address this need. Vecima is uniquely positioned in the burgeoning markets for both cable access and IPTV, and our strategies are positioning us for significant growth,” said Mr. Kumar.

As previously reported, Vecima’s Board of Directors declared a quarterly dividend of $0.055 per share for the period. The dividend will be payable on March 29, 2021 to shareholders of record as at February 26, 2021.

CONFERENCE CALL

A conference call and live audio webcast will be held today, February 11, 2021 at 1 p.m. ET to discuss the Company’s second quarter results. Vecima’s unaudited interim condensed consolidated financial statements and management’s discussion and analysis for the three and six months ended December 31, 2020 are available under the Company’s profile at www.SEDAR.com, and at www.vecima.com/financials/.

To participate in the teleconference, dial 1-800-319-4610 or 1-604-638-9020. The webcast will be available in real time at http://services.choruscall.ca/links/vecima20210211.html and will be archived on the Vecima website at https://vecima.com/investor-relations/earnings-call-archive/

About Vecima Networks

Vecima Networks Inc. is a global leader focused on developing integrated hardware and scalable software solutions for broadband access, content delivery, and telematics. We enable the world’s leading innovators to advance, connect, entertain, and analyze. We build technologies that transform content delivery and storage, enable high‑capacity broadband network access, and streamline data analytics. For more information, please visit our website at www.vecima.com.

Adjusted EBITDA and Adjusted Earnings (Loss) Per Share

Adjusted EBITDA and Adjusted Earnings (Loss) Per Share do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures provided by other issuers. Accordingly, investors are cautioned that Adjusted EBITDA or Adjusted Earnings (Loss) Per Share should not be construed as an alternative to net income, determined in accordance with IFRS, as an indicator of the Company’s financial performance or as a measure of its liquidity and cash flows. For a reconciliation of Adjusted EBITDA or Adjusted Earnings (Loss) Per Share, investors should refer to Vecima’s Management’s Discussion and Analysis for the second quarter of fiscal 2021.

Forward-Looking Statements

This news release contains “forward-looking information” within the meaning of applicable securities laws. Forward-looking information is generally identifiable by use of the words “believes”, “may”, “plans”, “will”, “anticipates”, “intends”, “could”, “estimates”, “expects”, “forecasts”, “projects” and similar expressions, and the negative of such expressions. Forward-looking information in this news release includes the following statements: Vecima’s sales climbed to $30.4 million in the second quarter, signifying rapid year-over-year growth of 21% as our next generation technologies gained momentum; we paired our excellent sales performance with a gross profit of $15.2 million and adjusted EBITDA of $2.5 million, which we achieved despite a $1.2 million reduction of EBITDA from significant foreign exchange headwinds during the period and the addition of the first full quarter operating expenses from the acquired Nokia assets, which we continue to anticipate as EBITDA neutral on a first full-year operating basis; our top-line performance represented the best quarter in almost five years and was led by surging demand for our industry-leading portfolio of Entra Distributed Access Architecture (DAA) products; keep in mind that we are still in the earliest stages of the DAA market; we see much more to come from Entra as current and additional customers transition to scale deployment as a broad set of MSOs initiate field deployments of DAA in response to both network capacity pressures and the larger trend of ramping access network bandwidth; across our business, we are addressing major market opportunities with technologies closely aligned to the needs of our global customers and laying the foundation for powerful growth; fiscal 2021 is proving to be a breakout year for Vecima; the vast potential of the cable industry’s once-in-a-lifetime technology transition to DAA is materializing, and we are tapping into it broadly with the industry’s most comprehensive portfolio of distributed access solutions and the ability to address any and all of the potential DAA system architectures; simultaneously we are laying the groundwork for growth in our Content Delivery and Storage segment; while we continue to anticipate measured CDS sales growth in fiscal 2021, IPTV usage is increasing rapidly in households around the world and our MediaScaleX solutions enable operators to address this need; and, Vecima is uniquely positioned in the burgeoning markets for both cable access and IPTV, and our strategies are positioning us for significant growth.

A more complete discussion of the risks and uncertainties facing Vecima is disclosed under the heading “Risk Factors” in the Company’s Annual Information Form dated September 24, 2020, as well as the Company’s continuous disclosure filings with Canadian securities regulatory authorities available at www.sedar.com. All forward-looking information herein is qualified in its entirety by this cautionary statement, and Vecima disclaims any obligation to revise or update any such forward-looking information or to publicly announce the result of any revisions to any of the forward-looking information contained herein to reflect future results, events or developments, except as required by law.

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Financial Position

(unaudited – in thousands of Canadian dollars)

As at

 

 

 

December 31, 2020

 

June 30, 2020

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

$

10,869

$

17,350

Short-term investments

 

 

 

9,885

 

17,165

Accounts receivable

 

 

 

27,148

 

24,908

Income tax receivable

 

 

 

364

 

333

Inventories

 

 

 

20,014

 

17,212

Prepaid expenses

 

 

 

2,090

 

2,051

Contract assets

 

 

 

730

 

646

Total current assets

 

 

 

71,100

 

79,665

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

 

 

 

14,402

 

11,801

Right-of-use assets

 

 

 

3,613

 

4,010

Goodwill

 

 

 

15,158

 

15,487

Intangible assets

 

 

 

69,855

 

69,200

Other long-term assets

 

 

 

1,551

 

1,301

Investment tax credits

 

 

 

25,385

 

24,374

Deferred tax assets

 

 

 

4,881

 

4,460

Total assets

 

 

$

205,945

$

210,298

Liabilities and shareholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

$

16,756

$

17,105

Provisions

 

 

 

1,295

 

492

Income tax payable

 

 

 

574

 

130

Deferred revenue

 

 

 

4,598

 

4,960

Current portion of long-term debt

 

 

 

1,629

 

1,698

Total current liabilities

 

 

 

24,852

 

24,385

Non-current liabilities

 

 

 

 

 

 

Provisions

 

 

 

414

 

400

Deferred revenue

 

 

 

2,485

 

602

Deferred tax liability

 

 

 

7

 

536

Long-term debt

 

 

 

4,099

 

4,613

Total liabilities

 

 

 

31,857

 

30,536

Shareholders’ equity

 

 

 

 

 

 

Share capital

 

 

 

7,925

 

3,161

Reserves

 

 

 

2,006

 

3,838

Retained earnings

 

 

 

164,209

 

170,665

Accumulated other comprehensive (loss) income

 

 

 

(52)

 

2,098

Total shareholders’ equity

 

 

 

174,088

 

179,762

Total liabilities and shareholders’ equity

 

 

$

205,945

$

210,298

 

 

 

 

 

 

 

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Comprehensive (Loss) Income

(unaudited – in thousands of Canadian dollars, except per share amounts)

 

 

Three months

Six months

 

Periods ended December 31,

 

 

2020

 

2019

 

2020

 

2019

Sales

 

$

30,372

$

25,123

$

58,216

$

45,235

Cost of Sales

 

 

15,193

 

9,115

 

30,028

 

18,753

Gross Profit

 

 

15,179

 

16,008

 

28,188

 

26,482

Operating expenses

 

 

 

 

 

 

 

 

 

Research and development

 

 

7,158

 

4,534

 

13,502

 

9,602

Sales and marketing

 

 

3,646

 

3,427

 

6,855

 

7,173

General and administrative

 

 

4,627

 

4,142

 

9,418

 

8,123

Share-based compensation

 

 

1,210

 

17

 

1,449

 

34

Other expense (income)

 

 

3

 

(145)

 

 

(155)

Total operating expenses

 

 

16,644

 

11,975

 

31,224

 

24,777

Operating (loss) income

 

 

(1,465)

 

4,033

 

(3,036)

 

1,705

Finance income

 

 

1

 

554

 

162

 

762

Foreign exchange loss

 

 

(1,222)

 

(477)

 

(1,447)

 

(179)

(Loss) income before income taxes

 

 

(2,686)

 

4,110

 

(4,321)

 

2,288

Income tax expense (recovery)

 

 

432

 

549

 

(365)

 

111

Net (loss) income

 

$

(3,118)

$

3,561

$

(3,956)

$

2,177

Other comprehensive loss

 

 

 

 

 

 

 

 

 

Item that may be subsequently reclassed to net income

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

(1,538)

 

(426)

 

(2,150)

 

(203)

Comprehensive (loss) income

 

$

(4,656)

$

3,135

$

(6,106)

$

1,974

Net (loss) income per share

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.14)

$

0.16

$

(0.18)

$

0.10

Diluted

 

$

(0.14)

$

0.16

$

(0.18)

$

0.10

Weighted average number of common shares

 

 

 

 

 

 

 

 

Shares outstanding – basic

 

22,733,716

22,404,999

22,607,863

22,420,018

Shares outstanding – diluted

 

22,733,716

22,444,540

22,607,863

22,442,995

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Change in Equity

(unaudited – in thousands of Canadian dollars)

 

 

Share

capital

 

Reserves

 

Retained

earnings

 

Accumulated

other

comprehensive

(loss) income

 

Total

 

Balance as at June 30, 2019

$

1,916

$

4,104

$

173,898

$

1,010

$

180,928

Net income

 

 

 

2,177

 

 

2,177

Other comprehensive loss

 

 

 

 

(203)

 

(203)

Dividends

 

 

 

(2,464)

 

 

(2,464)

Shares issued by exercising options

 

758

 

(199)

 

 

 

559

Share-based payment expense

 

 

34

 

 

 

34

Balance as at December 31, 2019

$

2,674

$

3,939

$

173,611

$

807

$

181,031

Balance as at June 30, 2020

$

3,161

$

3,838

$

170,665

$

2,098

$

179,762

Net loss

 

 

 

(3,956)

 

 

(3,956)

Other comprehensive loss

 

 

 

 

(2,150)

 

(2,150)

Dividends

 

 

 

(2,500)

 

 

(2,500)

Shares issued by exercising options

 

3,016

 

(783)

 

 

 

2,233

PSUs settled in common shares

 

1,748

 

(2,498)

 

 

 

(750)

Share-based payment expense

 

 

1,449

 

 

 

1,449

Balance as at December 31, 2020

$

7,925

$

2,006

$

164,209

$

(52)

$

174,088

 

VECIMA NETWORKS INC.

Interim Condensed Consolidated Statements of Cash Flows

(unaudited – in thousands of Canadian dollars)

 

Three months

 

Six months

Periods ended December 31,

 

2020

 

2019

 

2020

 

2019

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net (loss) income

$

(3,118)

$

3,561

$

(3,956)

$

2,177

Adjustments for non-cash items:

 

 

 

 

 

 

 

 

Loss (gain) on sale of property, plant and equipment

 

7

 

(135)

 

9

 

(121)

Depreciation and amortization

 

3,889

 

2,972

 

7,431

 

6,469

Share-based compensation

 

1,210

 

17

 

1,449

 

34

Income tax expense (recovery)

 

233

 

82

 

(344)

 

(26)

Deferred income tax expense (recovery)

 

199

 

467

 

(21)

 

137

Interest expense

 

57

 

78

 

116

 

158

Interest income

 

(59)

 

(237)

 

(147)

 

(460)

Net change in working capital

 

(2,424)

 

(2,845)

 

(1,076)

 

(4,038)

(Increase) decrease in other long-term assets

 

(337)

 

154

 

(294)

 

160

Increase (decrease) in provisions

 

32

 

(78)

 

43

 

(78)

Increase in investment tax credits

 

(29)

 

(51)

 

(70)

 

(89)

Income tax received

 

174

 

173

 

174

 

173

Income tax paid

 

(370)

 

(46)

 

(495)

 

(68)

Interest received

 

60

 

237

 

148

 

460

Interest paid

 

(12)

 

(78)

 

(22)

 

(158)

Cash (used in) provided by operating activities

 

(488)

 

4,271

 

2,945

 

4,730

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures, net

 

(833)

 

(481)

 

(1,282)

 

(925)

Purchase of short-term investments

 

(57)

 

(578)

 

(141)

 

(778)

Proceeds from sale of short-term investments

 

7,082

 

6,700

 

7,421

 

8,100

Deferred development costs

 

(3,832)

 

(2,776)

 

(7,280)

 

(5,426)

Business acquisition

 

 

 

(6,401)

 

Cash provided by (used in) investing activities

 

2,360

 

2,865

 

(7,683)

 

971

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from government grants

 

 

63

 

 

94

Principal repayments of lease liabilities

 

(491)

 

(316)

 

(866)

 

(648)

Repayment of long-term debt

 

(62)

 

(63)

 

(125)

 

(146)

Dividends paid

 

(2,500)

 

(2,464)

 

(2,500)

 

(2,464)

Issuance of shares through exercised options

 

1,940

 

559

 

2,233

 

559

Cash used in financing activities

 

(1,113)

 

(2,221)

 

(1,258)

 

(2,605)

Net increase (decrease) in cash and cash equivalents

 

759

 

4,915

 

(5,996)

 

3,096

Effect of change in exchange rates on cash

 

(322)

 

82

 

(485)

 

30

Cash and cash equivalents, beginning of period

 

10,432

 

17,963

 

17,350

 

19,834

Cash and cash equivalents, end of period

$

10,869

$

22,960

$

10,869

$

22,960

 

 

 

 

 

 

 

 

 

 

Contacts

Vecima Networks
Investor Relations – 250-881-1982

invest@vecima.com

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